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Page 1 AHP HABITAT DISBURSEMENT MANUAL Effective February 1, 2011 Page 2 TABLE OF CONTENTS SUMMARY .................................................................................................................................... 3 DISBURSEMENT AVAILABILITY ............................................................................................ 3 DISBURSEMENT PROCESSING ................................................................................................ 3 DISBURSEMENT CRITERIA ...................................................................................................... 4 HOUSEHOLD ELIGIBILITY GUIDELINES ............................................................................... 4 Calculation of Income ................................................................................................................. 4 Verification Requirements .......................................................................................................... 5 HUD Handbook Website ............................................................................................................ 5 DISBURSEMENT FEASIBILITY ................................................................................................. 5 Reasonableness of Project Development Costs .......................................................................... 6 Feasibility Guidelines ................................................................................................................. 6 Affordability Analysis ................................................................................................................ 6 DISBURSEMENT TIMELINE AND SUBSIDY ADJUSTMENTS ............................................. 7 Timeline for Disbursement of Funds .......................................................................................... 7 Transfer of Funds ........................................................................................................................ 7 Subsidy Adjustments .................................................................................................................. 7 DOCUMENTS AND FORMS ....................................................................................................... 9 AHP Habitat Disbursement Request Instructions ....................................................................... 9 Required Documentation Descriptions ..................................................................................... 10 Owner-occupied Retention Language....................................................................................... 22 AHP Habitat Disbursement Request – pdf version.................................................................. 23 FREQUENTLY ASKED QUESTIONS AND COMMON MISTAKES ..................................... 25 Frequently Asked Questions ..................................................................................................... 25 Common Mistakes .................................................................................................................... 27 STAFF LISTING .......................................................................................................................... 28 Page 3 SUMMARY This AHP Habitat Disbursement Manual has been designed as a reference guide for Sponsors and Members (banks) that have been awarded Affordable Housing Program (AHP) funds by the FHLBank of Cincinnati for Habitat or Habitat-like projects. Instructions for accessing funds, checklists, feasibility guidelines, and retention language are included in this manual. Please review the manual prior to submitting a request for funding. One AHP Habitat Disbursement Request must be completed by both the Sponsor and the Member for each request. Use the Disbursement Request form and this manual to identify acceptable documentation for draws on homeownership projects. You must complete the proper forms and submit the necessary documentation so that the request may be processed as expeditiously as possible. Please allow at least 30 days for processing a disbursement request. For questions regarding funding, please contact the Housing Program Manager/Disbursements. DISBURSEMENT AVAILABILITY Disbursements will be processed by the FHLBank in accordance with the FHLBank’s procedures and guidelines for funding of subsidies and all applicable monitoring policies, which are published on the FHLBank’s website, www.fhlbcin.com. Restricted Access to AHP Subsidy The FHLBank reserves the right to deny or delay subsidy disbursement to a Member or Sponsor if: 1. Either the Member or the Sponsor has failed to respond to a prior FHLBank request for information regarding this or other AHP projects, or 2. If the Member or Sponsor has been asked by the FHLBank to cure a noncompliant situation and resolution is pending, or 3. The Sponsor currently has other older, open, and incomplete AHP projects that must be closed or making adequate progress towards completion. DISBURSEMENT PROCESSING In processing disbursement requests, the FHLBank reviews the information submitted with the disbursement request and other pertinent project information obtained from the Member and Sponsor during the review process. The FHLBank verifies that the project continues to qualify for the awarded subsidy based on the applicable threshold requirements and scoring criteria and that the Member and Sponsor have complied with the obligations committed in the approved application. The FHLBank re-evaluates the financial and operational feasibility of the project and verifies the project’s continued need for subsidy. Members and Sponsors requesting AHP funds from the FHLBank must have documents in place in a form satisfactory to the FHLBank to meet the requirements of the AHP Regulation and may be required, upon the FHLBank’s request, to provide copies of such documents to the FHLBank prior to the FHLBank’s Page 4 disbursement of funds. Below is a detailed list of documents required for disbursement processing. The FHLBank reserves the right to request further documentation as necessary. All AHP funds are subject to the FHLBank’s funding requirements. Receipt of a disbursement does not guarantee compliance with the AHP guidelines. The FHLBank reserves the right to reduce or recapture funds at any time, should the project be found out of compliance or no longer demonstrate the need for subsidy. DISBURSEMENT CRITERIA All disbursements will require certain documentation necessary for the FHLBank to process the request. Habitat projects must submit one disbursement request per household upon sale of the home, as evidenced by the executed Note and Mortgage (Deed of Trust). The documents required will be described in detail towards the end of this manual. The FHLBank should receive the disbursement request package within 60 days of the closing of each unit in the project. A preliminary review can be completed by the FHLBank before the homebuyer closes on the property to determine income targeting, special needs or elderly status, homeless status, or first- time homebuyer status for a specific homebuyer. Reviews can take up to 30 days. In order to complete the review, the FHLBank must receive the following in a form that meets the standards set forth in this manual: Fax coversheet or email indicating the project number, homebuyer name, and property address (or at least county if not the full address) Signed and dated initial application/intake form Documentation of household size if not indicated on the application Third-party income documentation of all income sources for the initial intake application year for all household members age 18 or older Verification of homeless, special needs, elderly, or first-time homebuyer status, if applicable After closing of the property, the Sponsor must submit the remaining documents listed on the AHP Habitat Disbursement Request in order to receive funds. HOUSEHOLD ELIGIBILITY GUIDELINES Verification of the household’s eligibility is required for a disbursement. Household size, income, and status (special needs, elderly, homeless, etc.) must be verified and documented for all prospective AHP fund recipients. Calculation of Income The FHLBank requires that all households meet the income targeting requirements outlined in their project’s application or approved project modification. The FHLBank adheres to the Page 5 income calculation guidelines found in Section 5.5 of the HUD Handbook 4350.3. The income, along with income from assets, of all household members age 18 or older must be verified along with any disability benefits or child support payments received for a child for the calendar year in which the initial application or intake form was completed. Please refer to Chapter 5 of the HUD Handbook 4350.3 for a complete list of income inclusions and exclusions and for more information on calculating income derived from assets. The annual income is calculated for the initial intake application year from January to December. The annual income percentage is based on the MTSP (for initial intake applications dated in 2009 or later) or HUD (for applications dated in 2008 or earlier) limits for the year of the initial intake application for the number of persons residing in the household in the county and state where their property will be located. MTSP limits can be found at: http://www.huduser.org/portal/datasets/mtsp.html. HUD limits can be found at: http://www.huduser.org/portal/datasets/il.html. Very low income is the 50% income limit. Similar information is also available on the FHLBank’s website at www.fhlbcin.com under Resources/Webinars by clicking the link to the “Determining Income” webinar. This webinar is geared toward our Welcome Home Program, but the calculation of the household income is the same for both programs. Verification Requirements The FHLBank prefers that all verifications come from third-party sources such as pay stubs, verifications of employment, W-2s, or signed tax returns. However, second-party verification may be acceptable if third-party verification cannot be reasonably obtained. Please refer to Chapter 5 of the HUD Handbook 4350.3 for acceptable forms of verification. The date of the income documentation must match the year of the initial intake application except for child support documents such as the divorce decree or child support court order. HUD Handbook Website http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4350.3/43503c5HSGH.pdf DISBURSEMENT FEASIBILITY The project must meet all feasibility requirements and guidelines outlined here or provide explanations satisfactory to the FHLBank for any values outside the guidelines. Projects that deviate from these parameters will undergo additional review and underwriting to determine the reason for, and the reasonableness of, any deviation. Based on this review and underwriting, staff may work with project Sponsors or owners to make adjustments to the financial information submitted at application or at disbursement to ensure that the information accurately reflects the nature and financial structure of the project. The FHLBank may also allow reasonable deviations from the guidelines, based on the nature, location, and type of project and based on explanations provided by the Sponsor to justify such deviations. However, the Sponsor or project owner is ultimately responsible for ensuring that Page 6 financial information is correct and consistent and that the project’s financial structure meets the FHLBank’s guidelines, or that any deviations are adequately explained, justified, and documented. The FHLBank assumes no obligation to reconcile conflicting information, accept incomplete information, or seek additional information or clarification that is not provided at time of application or disbursement request. Reasonableness of Project Development Costs Project feasibility will be reviewed and assessed at time of application, at time of disbursement, and at any project modification. The FHLBank will determine the reasonableness of proposed or actual costs based on its experience with similar projects, similar locations, and similar populations being served. The FHLBank’s determination will be final and any costs determined not reasonable will be disallowed and will not be reimbursed with AHP funds. Feasibility Guidelines “Total development costs” are expected to not exceed $175,000 per unit. a. Analysis of project costs will consider the geographic location of the project, development conditions, and other non-financial household or project characteristics. Total development costs per unit may exceed the guideline only if justified by the applicant based on the special circumstances cited. b. Even costs below the guideline must be determined to be reasonable. The guideline is not intended as a “safe harbor.” The FHLBank may review costs per unit, costs per square foot, individual line-item costs, or use other measures to determine that development costs are reasonable. Fees to developer, consultant, application preparer, and similar costs, such as construction management in projects for which the Sponsor acts as the general contractor (collectively considered “developer fee”) may not exceed the percentage (maximum at application is 15%) approved of total development costs or amount of developer fee approved at application. “Construction Hard Costs” must be at least seventy five percent (75%) of “Total Development Costs.” The AHP subsidy requested for a project may not exceed $50,000 per AHP-eligible unit. The AHP subsidy requested should not be higher than the subsidy approved per unit at application unless future units will fall below this limit. Affordability Analysis Using the area median income (adjusted for the number of persons residing in the household per the intake application) for the intake year in the county where the property is located and the monthly mortgage amount plus monthly insurance, taxes, and estimated Page 7 utilities, we calculate the affordability range of the potential partner family based on the housing expenses. The housing expenses should be between 20 percent and 30 percent of the partner family’s gross annual income as determine for the intake application year. If the annual income is not between these values, the FHLBank will only disburse a maximum of $7,500 per unit if sweat equity has been completed or a maximum of $5,000 without sweat equity. If the homebuyer receives Section 8 to Homeownership Assistance or other comparable income (documentation must be submitted), then the home is deemed affordable to the homebuyer, and this calculation is not performed. DISBURSEMENT TIMELINE AND SUBSIDY ADJUSTMENTS Timeline for Disbursement of Funds Once the Disbursement Request with all supporting documentation is received, the FHLBank will begin analyzing the information and will contact the Sponsor and the Member via fax or email should additional information or clarification be required. All disbursements will be processed in the order in which they are received. Please allow at least 30 days for the processing of all disbursement requests. However, should the FHLBank receive incomplete or incorrect documentation, delays in the disbursement process could occur. Upon a complete review, additional information is requested and the requested information should be received by the FHLBank within 30 days. For a timely receipt of funds, refer to the Frequently Asked Questions and Common Mistakes sections of this manual for tips on how to avoid unnecessary delays. Transfer of Funds Once your request has been approved, the Member and Sponsor will receive a Confirmation of AHP Funds Disbursement via fax or email indicating the amount disbursed for the homebuyer. Within one business day, the FHLBank will electronically deposit the approved funds into the Member’s Demand Deposit Account with the FHLBank. If the Member does not receive the funds within this timeframe, please contact the Housing Program Manager/Disbursements for assistance. Subsidy Adjustments The FHLBank reserves the right to make reasonable adjustments to all Disbursement Requests at the FHLBank’s discretion, in accordance with the FHLBank’s procedures and guidelines for Page 8 funding of subsidies and all applicable monitoring procedures. The majority of subsidy adjustments occur if the project’s funding sources have changed and there is no longer a need for subsidy, if the project no longer meets the applicable scoring criteria as outlined in the AHP Agreement, if the household does not meet the income-eligibility criteria or feasibility guidelines, if AHP monies are being used for ineligible expenses, or if the costs presented are not reasonable. If you have questions regarding an adjustment made to your Disbursement Request or the total amount of your AHP award, please contact the Housing Program Manager/ Disbursements for more information. Page 9 DOCUMENTS AND FORMS AHP Habitat Disbursement Request Instructions Collaboration between the project Member and Sponsor is necessary to complete the request form and provide the required documentation. Please follow the steps below to request funds. If you need additional assistance, contact the Housing Program Manager/Disbursements. Step 1: Complete the AHP Habitat Disbursement Request All sections on the AHP Habitat Disbursement Request must be completed. Attach additional sheets if necessary to provide any explanations. An incomplete request form or missing documentation may delay the funding process. If there is no change or the question is not applicable, please check the “N/A” box. Step 2: Provide Required Documents For all funding disbursements: The Affordable Housing Program Agreement and Contingency Letter must be signed by the project Member and Sponsor and returned to the FHLBank with original signatures. Additional documents are necessary. Please see the AHP Habitat Disbursement Request checklist for required documentation and this manual for required formatting. Incomplete or missing documentation may delay the funding process. Step 3: Obtain Required Signatures The AHP Habitat Disbursement Request must have signatures from both the project Member and Sponsor contacts. Step 4: Submit the AHP Habitat Disbursement Request with all required supporting documentation By Email: AHPDisbursement@fhlbcin.com o Subject line must indicate: [Project number] [Homebuyer’s name] Disbursement or Preliminary Review By Mail: Housing and Community Investment Federal Home Loan Bank of Cincinnati 221 E. 4th Street Cincinnati, OH 45202 By Fax: 513-852-7647 Page 10 Required Documentation Descriptions REQUIRED DOCUMENTATION DESCRIPTIONS AHP Habitat Must be executed by the Sponsor and Member contacts and all Disbursement sections of the request must be completed. Check the boxes for Request “Already on file,” “Enclosed,” or “N/A.” 1a Direct Subsidy Must be executed by two signers from the Member bank Agreement authorized to draw funds from the FHLBank. Original signatures are required. This document was mailed to the Member contact when the project was approved. This is only required one time. 1b Affordable Housing Must be executed by the Member and Sponsor contacts. This Program Agreement document was mailed to the Sponsor and Member contacts when the project was approved. Original signatures are required. This is only required one time. 1c Contingency Letter Must be executed by the Member and Sponsor contacts. This document was mailed to the Sponsor and Member contacts when the project was approved. Original signatures are required. This is only required one time. Executed and dated 2a Must be the initial intake application/form for the homebuyer(s) initial loan and must be signed and dated by the homebuyer(s). application or intake form 2b Documentation of If it cannot be determined from the application/intake form, the household size, if not Sponsor must submit a current, executed letter indicating the stated in the persons who were intending to reside in the household at the time application of initial application, their age(s), and details as to why this has changed if it differs from the initial application/intake form. 2c Third-party All income documentation must be from the year in which the verification, from the initial application/intake form was taken from January to year the application is December. If the application was taken mid-year, the income will dated, for all income be annualized. Additional income documentation instructions can sources for all be found in the HUD Handbook at household members http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4350.3/ 18 years old or older 43503c5HSGH.pdf Employment: two consecutive pay stubs containing year- to-date information, verification of employment form, W- 2, or a signed tax return. The FHLBank’s calculation includes overtime, commission, etc. Social Security or disability: 1099-SSA, benefit statement, Page 11 payment history, print-out from the SSA, etc. Child Support: notarized statement from the payer to the payee, child support court order or divorce decree from any year, or payment history report from a child support enforcement agency. Self-employment: 2 most recent signed tax returns with all schedules. The FHLBank will use the FNMA Form 1084 Cash Flow Analysis to determine the income for the current year by averaging the two most recent years’ income. You can obtain the form at https://www.efanniemae.com/sf/formsdocs/forms/1084.jsp Pension: most recent monthly pension account statement or two months’ most recent bank statements if funds are directly deposited. Unemployment compensation: verification form completed by source, benefit notification letter signed by authorizing agency. Zero Income: partner family/occupant self-certifies to zero income (Certification of Zero Income is available on our website at www.fhlbcin.com under the Welcome Home documents). Section 8 to Homeownership Assistance or other comparable income is not included in the calculation of income for the household but is needed to verify affordability. 3a Homebuyer attended “Homeownership counseling” means a program provided by, or mandatory based on one provided by, an organization recognized as homeownership experienced in homeownership counseling. The counseling counseling program must cover, at minimum, mortgage financing, credit- worthiness, household budgeting, and home maintenance. Must be documented with one of the following: Current, executed letter from the Sponsor indicating that the homebuyer(s) participated in the counseling Homebuyer counseling course completion certification If the documentation goes into specifics of each of the classes, the FHLBank will require evidence that the classes include home maintenance, credit-worthiness, household budgeting, and mortgage financing. The Bank encourages the counseling to include information on predatory lending. Page 12 3b First-time homebuyer “First-time homebuyer” means an individual or family who has not owned a home during the three-year period prior to the purchase of a home, except that: 1) Any individual who is a displaced homemaker may not be excluded from consideration as a first-time homebuyer on the basis that the individual, while a homemaker, owned a home with his or her spouse or resided in a home owned by the spouse; or 2) Any individual who is a single parent may not be excluded from consideration as a first-time homebuyer on the basis that the individual, while married, owned a home with his or her spouse or resided in a home owned by the spouse; or 3) Any individual or family may not be excluded from consideration as a first-time homebuyer on the basis that the individual or family owns a home that: a) Is not intended as a dwelling; b) Was lost through natural disaster; or c) Is manufactured housing which was not originally assembled to meet nationally recognized standards; or is not permanently affixed to a foundation that meets nationally recognized building code standards. Must be documented with one of the following: Current, executed letter from the Sponsor indicating that the homebuyer(s) is (are) first-time homebuyer(s). Indication in the application that the family has rented for the previous 3+ years. For Round 200802 only, first-time homebuyers can be any households who have lost their home due to foreclosure; documentation will be required from the lender. 3c Homeless household Must be documented with one of the following, and the intake meeting FHLBank’s application received must support the certification of homeless definition status: “Overcrowded housing” may be documented with a dated and executed certification from the Sponsor regarding living conditions at time of application. “Overcrowded housing” means a housing unit occupied by more than one household or any housing unit with an average of more than two persons per sleeping area (including a living room as a sleeping area). For example, seven people residing in a two-bedroom apartment qualifies as Page 13 overcrowded housing; or Copy of notice of condemnation or eviction notice; or Independent inspection of the property where the homebuyer was residing at time of application indicating that the property is uninhabitable and that repair/rehab is not economically feasible in the year if the intake application; or Executed and dated narrative from the Sponsor regarding the homebuyer’s lack of a fixed, regular, and adequate nighttime residence; or Notice from a supervised publicly or privately operated shelter; or Notice from an institution that provides a temporary residence for individuals intended to be institutionalized; or Evidence that the homebuyer’s primary nighttime residence is a “mobile home” that was constructed before 1976 and does not meet the National Manufactured Housing Construction Safety Standards. This can be an appraisal indicating the year constructed or other comparable documentation deemed acceptable by the FHLBank; or For Round 200802 only, homeless can be any household who has lost their home due to foreclosure; documentation will be required from the lender for the foreclosure notice. 3d Special needs or “Elderly” means any person aged 55 or older. This is verified elderly household with the birth date or age on the intake application. meeting FHLBank’s “Special needs” means any person or household meeting one of definition the following additional definitions, and acceptable verification can be one of the options below (Do NOT submit medical records): 1. Physically disabled means any person with a physical impairment which results in substantial functional limitations documented by one of the following two options: Option A. Must receive the SSI or SSD disability statement or similar statement from a federal or state government from the intake application year. Option B. Signed and dated letter from licensed physician who attests that the person is deemed physically disabled and that by reason of this impairment is unable to perform life roles in at least one of the major domains of living, working, Page 14 learning or socializing. 2. Mentally disabled means any person who is diagnosed with a psychiatric disorder as documented by one of the following two options: Option A. Must receive the SSI or SSD disability statement or similar statement from a federal or state government agency from the intake application year. Option B. Signed and dated letter from licensed psychiatrist, psychologist, or clinical social worker who attests that the person is deemed to have a comparable long-term mentally disabling condition and that by reason of this impairment that the person is unable to perform life roles in at least one of the major domains of living, working, learning or socializing. 3. Developmentally disabled means any person having a severe chronic developmental disability who has been diagnosed with mental retardation as documented by one of the following two options: Option A. Must receive the SSI or SSD disability statement or similar statement from a federal or state government agency from the intake application year. Option B. Signed and dated letter from licensed physician who attests that the person is deemed developmentally disabled and that by reason of this impairment is unable to perform life roles in at least one of the major domains of living, working, learning or socializing. 4. Co-occurring disabled means any person diagnosed as having both a psychiatric disorder as well as a substance abuse/dependence (co-occurring) as documented by one of the following two options: Option A. Must receive the SSI or SSD disability statement or similar statement from a federal or state government agency from the intake application year. Option B. Signed and dated letter from a licensed psychiatrist, psychologist or clinical social worker attesting that by reason of their co-occurring condition they are unable to perform life roles in at least one of the major domains of living, working, learning or socializing. 5. Chemically dependent means any person with a history of substance abuse/dependency who is receiving treatment for the abuse/dependency as documented by one of the following options: Option A. Signed and dated letter from the entity providing the recognized therapeutic program indicating Page 15 that the household member is in the program. Option B. Signed and dated letter from a licensed physician, psychiatrist, psychologist, or clinical social worker indicating that the person in the household is receiving treatment for the chemical abuse/dependency. 6. Persons with AIDS means any person with a medical diagnosis of Auto Immune Deficiency syndrome or medical diagnosis as HIV positive and who is receiving medical care for the condition as documented by one of the following two options: Option A. Must receive the SSI or SSD disability statement or similar statement from a federal or state government agency from the intake application year. Option B. Must receive the medical diagnosis and indicate who is receiving medical care for the condition diagnosed. 7. The FHLBank will also consider other limiting factors and conditions in defining “special needs” to ensure that no person or household will be unnecessarily or inadvertently excluded under the definition above. Acceptable documentation must be submitted. Property vacant due 3e Must be documented with one of the following: to foreclosure, deed in lieu, or short sale Foreclosure sale document at purchase Evidence that the borrower conveyed property back to lender Letter from the lender Some other comparable document. AND evidence that the property was vacant at the time it was acquired by the Sponsor through one of the following: Photos dated within one year of the acquisition Appraisal dated within one year of the acquisition Other FHLBank approved documentation Units qualifying for these points must have been acquired by the AHP Sponsor (or household AHP recipient) directly from the foreclosure or sheriff’s sale, auction, or lender involved in the foreclosure. Properties that use the county or city as the intermediary between the lender and the Sponsor also qualify under this scoring criterion. Units that passed through the ownership of other entities except for the city or county subsequent to the foreclosure process but prior to acquisition by Page 16 the AHP Sponsor (or the household AHP recipient) DO NOT qualify for points under the AHP program. Projects were approved with at least 20% and up to greater than 50% of the units meeting this criterion at application. Property being 3f Must be documented with one of the following to evidence that rehabbed was vacant the property was vacant at the time it was acquired by the due to foreclosure or Sponsor: other at purchase Photos dated within one year of the acquisition Appraisal dated within one year of the acquisition Other FHLBank approved documentation Projects were approved with at least 20% of the units meeting this criterion. Homeowners 4a “Homeownership Club or Homeowners Association” means an Association with association of homeowners, created to allow regular discussions of policies and homeownership issues and neighborhood and community issues. procedures The association must be comprised of at least four homeowners, should have regular meetings, and some policies and procedures governing its business, but it does not have to be formally chartered or incorporated. Must provide a current, executed letter from the Sponsor indicating that the homeowners association has been formed along with documentation reflecting some policies and procedures governing its business. This is only required once. Empowerment 4b Must be a current, executed letter from the Sponsor indicating that activities, such as the services approved in the application are available to the budgeting/credit homebuyers. This is only required once. counseling, transportation, case management, etc. 8 hours of 4c Must be documented with one of the following: landscaping detailing the activities Current, executed letter from a community organization performed indicating that the 8 hours of landscaping labor have been provided and what activities were completed. Email that contains the contact name and information, and the organization’s name that indicates that the 8 hours of landscaping labor that have been provided and what activities were completed. This is only required once. For 2007 projects, this commitment must be from the Member Page 17 bank. 40 hours of 4d Must be documented with one of the following: construction labor detailing the Current, executed letter from a community organization activities performed indicating that the 40 hours of construction labor have been provided and what activities were completed. Email that contains the contact name and information, and the organization’s name that indicates that the 40 hours of construction labor that have been provided and what activities were completed. This is only required once. For 2007 projects, this commitment must be from the Member bank. Donation of at least 4e Must be documented with one of the following: $500 in goods/services Current, executed letter from an organization indicating that they have provided the service or good and that it is worth at least $500. Email that contains the contact name and information, and the organization’s name that indicates that they have provided the service or good and that it is worth at least $500 The donation must be for an eligible cost as indicated on the development budget. This is only required once. Fee waiver from the 4f Must be a current, executed letter from a government organization local government of indicating that they have provided the fee waiver for the project at least $500 and the value of the savings to the project. This is only required once. Completed and 5a Must be the completed and executed AHP Sponsor Commitment executed AHP Verification Form that is located on the FHLBank website. Sponsor Commitment Verification Form (on Submit with the last disbursement. website) if this is the Check which of the approved activities have been completed and last disbursement for describe, if applicable. the project If the project was not approved with the Sponsor completing any of the activities listed on the form, the form is not required. 5b Sponsor cash Must be shown on a homebuyer(s) Attachment D/Detailed Cost contribution Breakdown under Cash Contributions/Fundraising evidencing at verification, if least $250 for 2007 and earlier projects and at least $500 for 2008 Page 18 applicable and forward projects. 6 Final Attachment D Must use the FHLBank Attachment D with the attached Detailed and executed Cost Breakdown located on the FHLBank’s website at Detailed Cost www.fhlbcin.com under Resources/Documents and Forms. Breakdown available The Attachment D and Detailed Cost Breakdown submitted with at www.fhlbcin.com. the Disbursement Request must reflect the final costs and sources (Must use the for the homebuyer. Follow the directions on the Instructions tab FHLBank’s forms.) of this file to complete the form. If changes need to be made to The Developer’s Fee the documents after submission to the FHLBank but before must be less than or disbursement of AHP monies, the FHLBank will only allow and equal to the accept changes to the Developer’s fee, Cash Contributions/ Developer’s Fee Fundraising, Closing Date, Mortgage Amount, and Mortgage amount OR Term. Any other changes will be evaluated by management on a percentage approved case-by-case basis and additional documentation will be required. per unit in the AHP application. For The FHLBank will no longer accept QuickBooks or other forms of rehab-only, submit all documentation for the Detailed Cost Breakdown. of the invoices/ For rehab-only projects, must submit: receipts. All invoices or receipts for all rehab expenses and a breakdown that relates to the total expenses for that unit if not broken out on the Detailed Cost Breakdown. Undocumented costs will not be allowed. If the repayable mortgage amount is greater than the total costs listed on Attachment D, submit: Appraisal for the property that is dated within one year of purchase by the homeowner to evidence that the appraised value is higher than the mortgage value. Developer’s fee: The Developer’s fee may not exceed the percentage approved of total development costs or amount of developer fee per unit approved at application; otherwise, the grant will be reduced by the difference. Regardless of the dollar amount, the developer’s Fee cannot exceed 15% of the total development costs. Developer’s Fee equals the sum of the developer fee, developer overhead, consultant fee, and construction management fee if the Sponsor is the general contractor. Verification of land 7ab Must be documented with one of the following to verify the price cost paid by Habitat c of the land paid by or donated to the Sponsor: Verification that price HUD-1 Settlement Statement executed by both buyer and paid by Habitat is at Page 19 least 50% below- seller or settlement agent market Warranty deed evidencing the amount Verification that land Purchase contract was donated to Letter from the grantor Habitat Attachment D and Detailed Cost Breakdown must show: The amount paid for the land as the Land Paid Cost. The market value of the donated land as the Donated Land Value. 7d Appraisal or Property Must verify the market value of the land with an appraisal or Value Assessment Property Value Assessment (PVA) from the county recorder’s dated within one year office (some have websites) dated within one year of the of the acquisition acquisition date. date by Habitat to Related-party transactions require an appraisal. document the market value “Related party” means any party related by family, business, or personal interest to a Sponsor, Member, or other party directly involved in an AHP project. Developer, tax credit syndicator, consultant, property manager, service provider, and contractor are all considered parties directly involved in an AHP project. Related parties would include any persons related by family, business, or personal interest to any member of the Sponsor’s board of directors or staff, the Member’s board of directors or staff, or the board of directors or staff of any other party directly involved in an AHP project. If the price paid for the land is greater than the market value, the grant amount will be reduced by the difference unless: The project was reduced for this reason at the time of approval, or Submit a current, executed letter from a funding source shown on the final development budget for the homebuyer indicating their funds are paying for the land cost that exceeds the market value. Acceptable sources to cover this can be the Sponsor mortgage, Sponsor fundraising, or other grants. The Attachment D and Detailed Cost Breakdown must support the amount indicated in the letter. 8 Executed Notes and Must provide an executed Note and Mortgage (Deed of Trust) for Mortgages (Deeds of all loans to the homeowner, even if forgivable. This is required Trust) for all loans, for all loans from any party. even if forgivable The principle loan amount, term, and rate on the Note for any loan repayable to Habitat must match the amounts indicated on Page 20 Attachment D. Repayable second mortgages that are not paid to Habitat should not appear in the Habitat Note/Mortgage Amount on Attachment D but should show as an Other Cash Source on the Detailed Cost Breakdown. Forgivable mortgages should not appear on either the Attachment D or Detailed Cost Breakdown. If there is no second (forgivable or not) loan, submit a letter or email indicating there is no second loan. 9 Evidence of ALL If the project was approved for SHOP, NSP, HOME funds, etc., funding sources the executed grant or funding agreements must be submitted. approved in the If the project was approved for a cash contribution from the application and Member, see 11d below for information on how to verify this. additional sources. Include copies of all If the project was approved for a cash contribution from any other executed funding source, a current executed letter verifying the cash contribution or grant agreements, cancelled check must be submitted. equity letters, etc. For other permanent loans, the executed Note and Mortgage (Deed of Trust) must be submitted. If the development budget indicates $10,000 and this is documented with a check or a grant agreement indicating $10,000 is HOME monies, this is acceptable. If the development budget indicates $25,000 and a check for only $10,000 was received, verification of the difference must be submitted. If approved sources were not used for a homebuyer, indicate this in the disbursement package submitted. All funding sources may be submitted at any point that the project is open. However, they must be documented by the time of the last disbursement. 10 Warranty deed Must submit a deed indicating the property has been transferred to evidencing that the the homeowner and that the current FHLBank retention language property is in the is in the deed or referenced in the deed as an exhibit or addendum. name of the If the deed states an ending date for the retention language, this homeowner and date must correspond to 5 years after the closing date. FHLBank retention language is inserted “Retention period” means: Five (5) years from closing for an or attached AHP-assisted owner-occupied unit, or in the case of rehabilitation of a unit currently occupied by the owner where there is no closing, five years from the date that such rehabilitation is complete Please note that the retention language changes periodically and only the most recent language will be accepted. The most current retention language is attached to this document Page 21 and can be found on our website at www.fhlbcin.com. 11a Bridge or Must be documented with executed copies of Note(s) and/or construction loan Mortgage(s) (Deed(s) of Trust). This is only required once. from the Member 11b Below-market rate on Must be documented with one of the following: the construction or Executed Note and a copy of the standard rate sheet for bridge loan from the loans of this type offered by the Member and published Member for the general public Current, executed letter from the Member bank indicating the below-market interest rate for the project and how the interest rate is below-market. 11c Reduced/waived fee Must be documented with one of the following: on the construction or Settlement Statement(s) which indicates the actual costs bridge loan from the and fees charged for the loan and general lending program Member documents which indicate the normal fees and costs associated with that type of loan. Current, executed letter from the Member bank explaining the reduced costs/fee waivers for the project. 11d Cash contribution Must submit a copy of the cancelled check. from the Member This contribution must be listed as an Other Cash Source on one of the Detailed Cost Breakdowns for a homebuyer in the project. 11e Servicing of Must be documented with one of the following: homebuyers’ loans Language in the Note indicating where the payments are originated by the made. Sponsor at no cost from the Member Current, executed certification from the Member that the loan has been/will be set up on the Member’s servicing system. Page 22 Owner-occupied Retention Language Owner-occupied Retention Language The language below should be inserted into the Warranty Deed or as a Restrictive Covenant to the Warranty Deed. If it is attached to the Warranty Deed as an addendum or attachment, the Warranty Deed must reference the addendum or exhibit. If recorded as a Restrictive Covenant, the document must reference the Warranty Deed. Borrower(s), their successors, heirs and assigns for and in consideration of receiving direct subsidy funds from the Federal Home Loan Bank of Cincinnati’s Affordable Housing Program, must maintain ownership in this property for a period of five (5) years (Retention Period) from the date of the recording of this deed. i. The Federal Home Loan Bank of Cincinnati, whose mailing address is P.O. Box 598; Cincinnati, OH 45201-0598, is to be given notice of any sale, refinancing, foreclosure, conveyance by deed in lieu of foreclosure, assignment of the first mortgage to the Secretary of HUD, or change in ownership of the unit occurring prior to the end of the Retention Period. ii. In the case of a sale or refinancing prior to the end of the Retention Period, an amount equal to a pro rata share of the AHP Subsidy that financed the purchase, construction, or rehabilitation of the unit, reduced for every year the seller owned the unit, shall be repaid to The Federal Home Loan Bank of Cincinnati from any net gain realized upon the sale or refinancing of the unit; unless: (A) The unit was assisted with a permanent mortgage loan funded by an AHP advance; (B) The purchaser is a very low- or low- or moderate-income household as defined in the applicable Federal Housing Finance Agency regulations for the AHP (in which case the retention period ends with the conveyance to such purchaser); or (C) Following a refinancing, the unit continues to be subject to a deed restriction or other legally enforceable retention agreement or mechanism, incorporating the requirements of clauses (i), (ii), and (iii) contained herein. iii. The obligation to repay Subsidy to the Bank shall terminate after any foreclosure or conveyance by deed in lieu of foreclosure or any assignment of the first mortgage to the Secretary of HUD. Page 23 AHP Habitat Disbursement Request – pdf version Page 24 Page 25 FREQUENTLY ASKED QUESTIONS AND COMMON MISTAKES Below is a list of frequently asked questions and common mistakes that often occur when requesting a disbursement of funds. They are being provided in an attempt to assist Members and Sponsors in expediting the disbursement process. Frequently Asked Questions Q. Why does the FHLBank require documentation before releasing funds? A. In order to determine that grant recipients are eligible for AHP funds and to reduce the potential for recapture of funds from our Members, we require documentation of pass- through of AHP funds, evidence of acceptable long-term retention documentation, and independent verification of income on each prospective AHP funds recipient. Q. Can a homebuyer receive cash back at closing? A. No. This is strictly prohibited and will result in a reduction of the grant. Q. Are you concerned with the date of the income documentation? A. Income documentation, such as pay stubs, verification of employment, Social Security income, or unemployment, must be dated the same year in which the homebuyer(s) initial, executed application is dated. Please refer to this manual and the “Determining Income” webinar on the website at www.fhlbcin.com under Resources/Webinars to determine acceptable forms of income documentation. Q. Should I include food stamps in calculating income? A. No. Food stamps are not considered income for the purposes of calculating eligibility. Q. How does the FHLBank calculate an applicant’s overtime? A. We use the applicant’s year-to-date overtime and project it over a 52-week period. If the applicant is not expected to work additional overtime, we will require documentation from the employer indicating such. We will then add the overtime earned to his/her regular gross income. Q. Does the FHLBank have a standard retention document? A. Yes. The retention language is a part of this manual, but you should rely on the most current retention language on the FHLBank’s website under Resources/Documents and Forms/Attachment G - Retention Agreements. Page 26 Q. One of my proposed funding sources was not approved. Will my project be cancelled? A. If other financing or additional fundraising/cash contributions can be obtained within a reasonable timeframe, the project will not be cancelled. Q. If I received approval for an AHP grant, why do I need to send updated financial information when I request a disbursement of AHP funds? A. The approval of AHP funds for your project is a commitment to fill the financial gap that you have identified. The FHLBank will analyze a project’s financial structure for continued need for AHP funds at several stages. These include application approval, disbursement of funds, project modifications, and project completion. At any of these stages, the AHP funds could be reduced or eliminated if the project has changed significantly enough. In most cases, our analysis should not be cause for undue concern, since the great majority of projects continue to demonstrate the need for the full amount of the AHP commitment. Q. How will I know if a funding request is approved? A. A Confirmation of AHP Funds Disbursement will be emailed or faxed to the Member and Sponsor. Q. How long does it take to receive funding once the FHLBank has received a completed AHP Habitat Disbursement Request and all supporting documentation? A. Typically, the FHLBank will require up to 30 days for reviewing the Disbursement Request and providing the funds, but if additional information is required, it may take longer. Q. How will the Member institution receive funding after a request for funds has been approved? A. We will credit the Member’s Demand Deposit Account with the FHLBank for the amount approved. Q. We have had significant turnover within the organization since our application for AHP funds were approved. Are there any resources to improve our familiarity with the program and the approval process? A. See the AHP Habitat Disbursement webinar under Resources/Webinars on the FHLBank’s website at www.fhlbcin.com and review this manual. You may also contact a member of our staff for questions. Also be sure to notify the FHLBank of staffing changes so that we may update our records Page 27 Common Mistakes In order to assist our Members and Sponsors in receiving funds in a timely manner, we have included a list of common mistakes that can potentially delay the processing of your AHP Habitat Disbursement Request. 1. The AHP Habitat Disbursement Request is incomplete or unsigned by one or both parties. All questions should be answered. If a question is not applicable, please check the “N/A” box in the space provided. 2. The AHP Attachment D has not been provided or does not relate to the Detailed Cost Breakdown. 3. The Detailed Cost Breakdown was not signed and dated by the Sponsor. 4. All of the funding sources approved at application or used for the homebuyer were not documented with executed grant agreements, Notes/Mortgages (Deeds of Trust), or equity letters or the cost breakdown provided did not indicate use of any of these sources. 5. Documentation provided as evidence of special needs, elderly, homeless, or first-time homebuyer status does not meet the FHLBank’s definitions. 6. Income verification has not been provided for all sources of income, is not for the initial intake application year, does not adequately identify the household member or employer/issuer, or is not sufficient. This is the number one reason for delay. 7. Verification of land cost and/or market value was not submitted and/or does not tie to the amount on the Detailed Cost Breakdown or the property referenced in the borrower’s deed. 8. The homebuyer’s loan application is not signed and/or dated. 9. Household size is unclear from the application, or other documentation contradicts the household size listed on the intake application. 10. The Sponsor or Member is delinquent with regard to additional information submission or reporting or monitoring requirements of the FHLBank for the project being submitted or others. 11. The Sponsor or Member is unfamiliar with the commitments made in the AHP application. 12. The homebuyer’s deed does not contain the FHLBank’s retention language, contains old language, or does not reference attached language. 13. Project does not appear that it will fulfill all required commitments, requires modification, or may not be fully funded prior to the commitment expiration date. 14. The AHP Sponsor Commitment Verification Form was not submitted with the last disbursement for the project. 15. The Developer’s Fee on the Attachment D exceeds the approved limits. Page 28 STAFF LISTING Phone Number Email Address W. Jeff Reynolds (513) 852-7614 email@example.com Senior Vice President Damon v. Allen (513) 852-7518 firstname.lastname@example.org Vice President Brenda A. Pierre (513) 852-7505 email@example.com Housing Quality Assurance Officer Mary L. Hernandez (513) 852-7604 firstname.lastname@example.org Housing Program Manager/Reporting & Monitoring Jessica H. Wells (513) 852-7617 email@example.com Housing Development/Finance Specialist Julie M. Doerger ** (513) 852-7609 firstname.lastname@example.org Housing Program Manager/Disbursements & Modifications Jill A. Cravens ** (513) 852-7550 email@example.com Housing Program Manager/Welcome Home Laura K. Overton ** (513) 852-7603 firstname.lastname@example.org Housing Program Analyst 1-888-345-2246 Fax: (513) 852-7647 Visit us on the web at www.fhlbcin.com ** Habitat Disbursement Reviewers
"2011-AHP Habitat Disbursement Manual"